Saturday, January 10, 2015

As in my previous post, I would like to continue to
reflect on highlights from last year. One of the advantages of founding and
directing a global center is that I get to travel a lot. In the Fall 2014, I
travelled to seven countries on two continents. I cannot tell you how much I have
enjoyed it, even though I had little time to do anything else, including write my
blog.

There are many things that surprise me as I attend
conferences, meet people, and make my way through various cities. First, it is
surprising how many similarities I’ve found across countries that we usually consider
to be very different. I was at a restaurant in an unnamed city that was so
special it could have been a very popular dining destination in New York,
London, Rome, or Hong Kong, but it was in none of those cities. And while the food has been good, the traffic has
been bad and seems to be getting worse in every city around the world; this is
not just a feature of Rome or Washington, DC.

And there are differences that also work in
surprising ways. We refer to countries as “developed” versus “developing” or “emerging,”
of course with the assumption that the developing countries have a host of
problems to solve. One of the things I have started to notice in the supposedly
“developing” countries is that women are often in positions of command. I was
invited to speak at a conference in an “emerging” country where the rector from
one of the oldest and most prestigious universities is a woman and where women
are at the top management levels of financial institutions. In another developing
country where I attended a conference at the beginning of the Fall, the chair
of my session was a very famous journalist and, again, a woman. Developed countries have well-developed
markets, well-developed institutions, and good education systems, yet women are
paid less than men, and finding women in positions of power is often rare if
not impossible.So watch out young
people (young women)!

Another thing I have observed in the “developing”
countries is that young people get good jobs. It is not unusual to see
directors and managers who are under 30 or 40 year old, and I did not get the
impression that they were considered inexperienced or less competent because of
their age. In many developed countries, the unemployment rate among the young
is so high that I am not sure why we do not consider it a crisis. In my native
Italy, if you leave your parents’ home before age 30 or 40, you are considered an
adventurous person who does not understand what a jungle it is out there.

I think we may want to change our terminology: we
may want to refer to market economies as either “mature” or “young” because the
lines between developed and developing countries are starting to be very
blurred and there is not always such strong evidence of progress—as the term
“developed” seems to imply—on how women and young people are faring in some of
these supposedly developed countries.

These are some observations from my travel last year
and I hope to keep writing while sitting on airplanes…

Thursday, January 1, 2015

I am starting the new year by looking back and thinking of
the highlights of 2014. For me, one event stands out: the release of the
Programme for International Student Assessment (PISA) data, which measures the
financial literacy of 15-year-olds around the world. I am very proud that the
Global Financial Literacy Excellence Center (GFLEC) hosted the U.S. release of
the data and that we did it in collaboration with three of the most important
institutions for financial literacy: the Department of Education, the Consumer
Financial Protection Bureau, and the Department of the Treasury. While my team
can tell you that the months before the event were really hectic, my
preparation actually happened over several years.It started when the financial literacy expert
group that was asked to design the financial literacy assessment for PISA first
met. It was in Cambridge, Massachusetts (MA), and we all felt we were starting to
work on something very important. Since that meeting, I had been waiting for
the day when the data would be made available. That day was July 9, 2014.

The data was accompanied by a report that was written over a
period of time (hence the different timing than the data release for other PISA
subjects) and that can be accessed on the OECD’s and GFLEC’s website (see www.gflec.org). A lot has already been written about the PISA
financial literacy data and rather than summarizing the many findings, I would
like to highlight three main facts from these important data.

1)There are large differences in financial
literacy across the 18 countries that participated in the assessment. It is not
the countries that have the most developed financial markets or the highest
Gross Domestic Product (GDP) per capita that rank at the top of the financial
literacy scale. On the one hand, this should be a worry for rich countries, as it
shows that their youth is not well prepared to deal with the complexity of these
economies. On the other hand, it shows that financial literacy is not acquired
informally, simply by living in economies with sophisticated financial markets
(financial literacy does not come in the milk bottle.).

2)There are wide differences in financial literacy
within the countries that participated in the assessment. One of the most
interesting findings is the difference between male and female students. Many
have noted that, on average, there are no gender differences in financial
literacy. This requires some clarification. We have worked very hard at
designing questions that are gender neutral, and the methodology itself (some
questions have open-ended answers, so respondents can answer in their own
words) can soften the differences we have observed in male and female responses
to financial literacy questions among adults. But gender differences are still
present at these early stages of the life cycle. In fact, looking deeper one finds
that boys are more likely to locate at both the top and bottom levels of the
financial literacy scale than girls.

3)A sizeable amount of the variation in financial
literacy is accounted for by socio-economic status; in other words, the income
and education levels of parents matter for youth financial literacy. This is a
finding that we have documented among other age groups, for example young
adults (age 23 to 28). It shows that differences in financial literacy start to
emerge early in life, and depend on the family students are from. This is a
worrisome finding, and in my view, one of the main reasons why we need
financial literacy in school—to try to create a level playing field. This is the
topic we discussed at the conference GFLEC organized jointly with the OECD last
November titled “Toward a more inclusive society.” These are also my wishes for
2015: Having financial literacy in school and a more inclusive society (the two
topics are related, but, okay, I like to dream big!).

Let me return to July 9, 2014, the day of the PISA data release.As I mentioned earlier, for the financial
literacy expert group (and many were there on stage at the Washington, DC,
event), it was a day we had been waiting for for many years, since that first
meeting in Cambridge, MA.And as the data
was being illustrated on slides, discussions, testimonials, and reports, we felt
we had laid the first brick of a financial and economic structure that includes
financial literacy. For me, this was the best day of 2014.

There are a lot of advantages to organizing the release of
important data. You get to invite and meet famous people. You get to bring
together representatives of important institutions. You get to hear new ideas.
You get to test the patience and ingenuity of your collaborators. Arne Duncan,
the U.S.Secretary of Education, came to
speak at the event. He is a very charismatic leader and I got to interview him
on stage. He sent me a handwritten thank you note afterward, and I have framed
it!

My picture

About Me

Annamaria Lusardi is the Denit Trust Endowed Chair of Economics and Accountancy at the George Washington School of Business. Previously, she was the Joel Z. and Susan Hyatt Professor of Economics at Dartmouth College. She has taught at Dartmouth College, Princeton University, the University of Chicago Public Policy School, the University of Chicago Booth School of Business and the Graduate School of Business at Columbia University. From January to June 2008, she was a visiting scholar at Harvard Business School. She has advised the U.S. Treasury, the U.S. Social Security Administration, the Dutch Central Bank, and the Dartmouth Hitchcock Medical Center on issues related to financial literacy and saving. She is the recipient of the Fidelity Pyramid Prize, awarded to authors of published applied research that best helps address the goal of improving lifelong financial well-being for Americans. She holds a Ph.D. degree in Economics from Princeton University.